Volaris reports record third quarter 2015

MEXICO CITY, Mexico – Volaris, the ultra-low-cost airline serving Mexico, the United States and Central America, today announced its financial results for the third quarter 2015.

MEXICO CITY, Mexico – Volaris, the ultra-low-cost airline serving Mexico, the United States and Central America, today announced its financial results for the third quarter 2015.

Third Quarter 2015 Highlights

โ€ข Total operating revenues were Ps.5,220 million for the third quarter, an increase of 30.7% year over year.

โ€ข Non-ticket revenues were Ps.1,063 million for the third quarter, an increase of 43.3% year over year. Non-ticket revenue per passenger for the third quarter was Ps.319, increasing 13.2% year over year.

โ€ข Total operating revenue per available seat mile (TRASM) rose to Ps.134.4 cents for the third quarter, an increase of 5.4% year over year.

โ€ข Operating expenses per available seat mile (CASM) were Ps.106.6 cents for the third quarter, a decrease of 8.1% year over year.

โ€ข Adjusted EBITDAR was Ps.2,121 million for the third quarter, an increase of 95.5% year over year with an Adjusted EBITDAR margin of 40.6%, a margin expansion of 13.4 percentage points.

โ€ข Operating income was Ps.1,080 million for the third quarter, with an operating margin of 20.7%, a year over year operating margin improvement of 11.7 percentage points.

โ€ข Net income was Ps.1,152 million (Ps.1.14 per share / US$0.67 per ADS) with a net margin of 22.1% for the third quarter, a year over year net margin improvement of 13.4 percentage points.

โ€ข Net increase of cash and cash equivalents was Ps.380 million for the third quarter, mainly driven by cash flow from operating activities of Ps.243 million. Unrestricted cash and cash equivalents was Ps.4,408 million, representing 26% of the last twelve month total operating revenues.

Volarisยด CEO Enrique Beltranena commented: โ€œDuring the third quarter Volaris responded to an increase in demand by accelerating its capacity growth, driven by higher fleet utilization thanks to its network flexibility and agility. Volarisโ€™ ULCC model continues to penetrate the domestic and international markets, resulting in a strong quarter from commercial, operational and financial standpoints.โ€

Macroeconomic Environment Improves, but FX Volatile. Strong Traffic Volume Growth

โ€ข The Mexican macroeconomic environment: โ—ฆ GDP growth for the second quarter 2015 of 2.2% year over year.

โ—ฆ Consumer confidence increased 4.1%, 1.8% and 0.8% year over year in June, July and August of 2015, respectively.

โ—ฆ The Mexican General Economic Activity Indicator (IGAE) increased 2.0% year over year in July of 2015.

โ€ข Exchange rate volatility: The Mexican peso depreciated 25.1% year over year against the US dollar, as the exchange rate devalued from an average of Ps.13.11 pesos per US dollar in the third quarter 2014 to Ps.16.41 pesos per US dollar during the third quarter 2015.

โ€ข Lower fuel prices: The average economic fuel cost per gallon decreased 27.2% year over year in the third quarter 2015 to Ps.28.61 per gallon (US$1.68).

โ€ข Air traffic volume increase: The Mexican DGAC reported an overall passenger volume growth for Mexican carriers of 17.1% during July and August 2015 year over year. Domestic passenger volume increased 13.8%, while international increased 30.9%.

Unit Revenue Improvements driven by Non-Ticket Revenue Growth and Improved Revenue Management

โ€ข Unit revenue improvement and demand driven capacity growth: TRASM and yield increased 5.4% and 3.4% for the third quarter year over year, respectively, as a result of a stable domestic and international fare environment. In terms of ASMs, domestic capacity grew 16.8%, reflecting increasing market demand and associated yield recovery, while international capacity increased 44.2%.

โ€ข Non-ticket revenue growth: Non-ticket revenues per passenger increased 13.2% year over year for the third quarter, as the company implemented changes in ancillary products pricing, a new travel insurance product, as well as new payment options.

โ€ข New routes: In the third quarter, Volaris launched five new routes (one domestic and four international).

Operating Revenue Growth from Solid Traffic and Capacity Management

Volaris booked 3.3 million passengers in the third quarter, a 26.6% year over year growth. Volaris traffic (measured in terms of revenue passenger miles, or RPMs) increased 23.6% for the same period. Volarisโ€™ passenger market share, the second largest among Mexican carriers and first in the low cost segment, was 25.9% in the bimester of July and August in both domestic and international markets.

Volarisโ€™ total operating revenues were Ps.5,220 million in the third quarter, an increase of 30.7% year over year. Non-ticket revenue and non-ticket revenue per passenger reached Ps.1,063 million and Ps.319 in the third quarter, respectively, an increase of 43.3% and 13.2% year over year, respectively.

Fuel Savings Offset Exchange Rate Pressures

In the third quarter, Volaris continued to experience pressures in US-dollar denominated costs such as aircraft rents, international airport costs, and maintenance expenses due to the depreciation of the Mexican peso.

Despite these challenges, the CASM for the third quarter was Ps.106.6 cents, an 8.1% decrease compared to the third quarter 2014, mainly driven by lower fuel prices.

Young and Fuel Efficient Fleet

As of September 30, 2015, Volaris fleet was comprised of 55 aircraft (35 A320s, 18 A319s and 2 A321s), with an average age of 4.4 years. Volaris expects to end the year with 56 aircraft.

Strong Cash Flow Generation, Solid Balance Sheet and Good Liquidity

The net increase of cash and cash equivalents was Ps.380 million during the third quarter, mainly driven by the resources provided by operating activities of Ps.243 million.

As of September 30, 2015, Volaris had a balance of Ps.4,408 million in unrestricted cash and cash equivalents, representing 26% of the last twelve month operating revenues. Volaris recorded negative net debt (or a positive net cash position) of Ps.2,954 million and total equity of Ps.6,196 million.

During the third quarter, Volaris incurred capital expenditures of Ps.262 million, which included pre-delivery payments for acquisition of aircraft and rotable spare parts, furniture and equipment for Ps.244 million and intangibles assets for Ps.18 million. These acquisitions were offset by reimbursements of aircraft pre-delivery payments of Ps.270 million, and proceeds from disposals of rotable spare parts, furniture and equipment of Ps.78 million.

Active in Fuel Risk Management

Volaris has continued to remain active in its fuel risk management program. Volaris hedged 45% of its third quarter fuel consumption at an average strike price of US $2.07 per gallon, which combined with the 55% unhedged consumption, resulted in a blended average economic fuel cost of US$1.68 per gallon for the quarter.

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Linda Hohnholz

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